Report on distributional impacts of energy policies and the consequences for optimal policy mixes

The ENTRACTE research project is aiming to analyse the European climate policy portfolio with special emphasis on the role of interactions between its different parts. The project’s ultimate goal is to provide pragmatic guidance to policy makers for designing effective, cost efficient and politically and legally feasible climate policy portfolios.

The report summarises findings about the distributional impacts of energy and climate policies both across and within EU member states. By distributing revenues from auctioning emission permits in the EU ETS, the EU can distribute overall climate policy cost among member states such that adverse impacts of climate policy on the poorest member states can be avoided. If numerous member states undertake to implement stringent targets for power generation from renewable energy sources, this can lower the market price for permits in the ETS and thus reduce revenue for the member states with high allocation of revenues from permit auctioning.